Wealth, Warmth and Wellbeing: Whether Happiness is Relative or Absolute Depends on Whether it is About Money, Acquisition or Consumption

Abstract

A central and still open question in consumer and happiness research is whether happiness depends on absolute or relative levels of wealth and consumption. To address this question the authors go to a finer level than overall happiness and distinguish three types of happiness: happiness from money (monetary experience), from acquiring an item (acquisition experience), and from consuming an item (consumption experience). They find that monetary and acquisition experiences are relative but consumption experience can be absolute. The authors further distinguish consumption as being inherently evaluable (such as the temperature of bathwater) or inherently inevaluable (such as the size of a diamond), and find that inherently evaluable experience is absolute, while inherently inevaluable experience is relative. Including both experimental and field data, this research suggests that raising the wealth of all can possibly raise the happiness of all if attention is focused on consumption rather than on money or acquisition and wealth is spent on improving inherently evaluable rather than inherently inevaluable consumption.

Keywords: happiness, money, acquisition, evaluability, relative vs. absolute

JEL Classification: D81, D11, D12, D91